Two major leaders in oil market, the executive director of the International Energy Agency (IEA), Fatih Birol, and the secretary general of the Organization of the Petroleum Exporting Countries (OPEC), Mohammad Sanusi Barkindo, spoke by phone to review the current situation in global oil markets - Photo by Secretariat of OPEC

JAKARTA (TheInsiderStories) – The global oil prices fell almost 8 percent on Thursday (03/26) amid the price war between Saudi Arabia and Russia. Yesterday, price of West Texas Intermediate crude settled down 7.7 percent at US$22.60 per barrel and Brent prices dropped by 3.3 percent to $26.50 a barrel.

The oil prices was also hit by Saudi Arabia plans to hike its production from 9.7 million bpd to 12.3 million bpd in the next five days. Earlier, the oil cartel and its allies (OPEC+) urged the producer cut its production around 1.5 million bpd until the end of 2020.

In addition, United States (US) energy secretary, Dan Brouillette has proposals to raises funds $3 billion to buy 77 million bpd to the Congress to top up the petroleum reserves has rejected by the Congress. The stimulus passed by the Senate did not allocate any funding for his proposals.

Kirill Dmitriev, head of Russia’ sovereign wealth fund told Reuters, joint actions by countries are needed to restore the global economy and OPEC+ deal’ framework. He and the energy minister, Alexander Novak, were Russia’ top negotiators in the production cut deal with OPEC. The existing deal expires on March 31.

While, deputy energy minister Pavel Sorokin considers $45 – 55 per barrel to be a fair market priced for oil at the moment, optimal for demand growth, but would not allow shale projects to grow. He adds, the contribution of coronavirus to the decline in prices is estimated at $25 per barrel.

“The decline in production that was discussed, first by 600,000 barrels, then by 1.5 million barrels, is a drop in the bucket compared to the blow that the virus inflicted on the global economyM,” he noted by adding, a decrease in demand around 10 – 15 million bpd.

Goldman Sachs has forecast that global oil demand, which stood at 100 million bpd last year, will fall by 10.5 million bpd in March and in April around 18.7 million bpd. For the year, oil consumption is expected to contract by around 4.25 million bpd.

On March 16, the executive director of the International Energy Agency (IEA), Fatih Birol, and the secretary general of the OPEC, Mohammad Sanusi Barkindo, spoke by phone to review the current situation in global oil markets.

Both parties assessed the impact of the coronavirus and the recent broad-based financial and oil market volatility on the global economy. Birol and Barkindo noted that if current market conditions continue, the developing countries income from oil and gas will fall by 50 to 85 percent in 2020, reaching the lowest levels in more than two decades, according to a recent IEA analysis.

They underscored the importance of market stability, as the impacts of extreme volatility are felt by producers, particularly in terms of much needed income, and by both producers and consumers, who are affected by an unstable and unpredictable market.

Written by Staff Writer, Email: theinsiderstories@gmail.com